Tuesday, May 18, 2010

Tiebout in action: when cities cooperate

The Los Angeles area cities of Glendale, Burbank and Pasadena are thinking about joining forces to more efficiently supply some public services including police, technology services, purchasing and transit. The cities expect that they can save money on some labor costs and lower the overall cost of supplying desirable local public goods. So why haven't they already done this? Why wait for bad financial times to search for inefficiencies? Charles Tiebout has some ideas about this, but Burbank City Manager Mike Flad puts the theory to practice:
Despite the possible economic benefits of consolidation, city officials acknowledged that they could face some opposition in their respective constituencies.

"Each of us have different commitments to the quality of service depending on the quality of service we're providing," Flad said. "For instance, Burbank might have higher standards for quality of service at its animal shelter, or vice versa."

In Pasadena, libraries are partially funded by a parcel tax, so it has more money per capita and a higher expectation for library service.

"The cities that have a higher level of service in a given area may not want to see that degraded, even if it means saving money," Flad said.

Tiebout--and subsequent public choice scholars--argue that local governments supply bundles of goods that reflect local interests and these bundles are a form of competition. The more that these three cities cooperate the less there will be to set each of them apart. So certain public services will be supplied more efficiently, but the services provided may not reflect local preferences. In a region of heterogeneous preferences more choices of bundles is better then fewer choices of bundles.

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